categories added to investment classification group aim to make pensions comparison easier
The ABI has added further categories to its pension fund sector classifications, providing greater clarity for trustees and their advisers and better enabling like-for-like fund comparison.
The Investment Classification Group (ICG) now has a comprehensive list of sectors to enable investors to compare different pension institutional funds.
Seven new classifications have been added to the existing categories, which are managed, UK equity, fixed income and distribution. The new fund categories are: protected guaranteed, money market, currency, property, commodity/energy, closed and unclassified.
All categories are divided into sub-sectors. For example, the managed category includes defensive managed, which has a maximum of 35% total equity content and a minimum of 85% sterling-based assets. Cautious managed can have a maximum of 60% total equity and a 50% minimum of sterling-based assets. At the other end of the scale, the stock market managed category can have 100% equity content and a minimum of 50% sterling-based assets.
Protected funds are defined as those which principally aim to provide a return of a set amount of capital back to the investor plus some market upside. Money market funds are described as those with at least 95% of assets in sterling money market instruments. These include bank deposits, certificates of deposit or very short-term fixed interest deposits. Currency funds must have at least 95% of assets in money market instruments but not exclusively in sterling-denominated investments.
Property funds must have at least 80% of their assets in direct property or authorised property unit trusts. Commodity/Energy funds invest in energy-related shares.
The sectors are independently monitored by Lipper. Other ratings agencies, including Micropal and Standard & Poor's, also use the ABI categorisation and all three sit on the ICG panel, helping to determine which categories funds go into.
The funds will be monitored on a monthly or bi-annual basis depending on how likely funds are to swing between sectors. The final categorisation of funds will comprise friendly society funds. This area is under development and will be completed in the course of this year.
Malcolm Kemp, chairman of the ICG, said: 'The complete categorisation of different types of funds will improve customer comparison and help them understand what they are buying in a way that was difficult to in the past.'
To see the categorisation go to www.abi.org.uk/cif.
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